Examination of Witnesses (Questions 40-59)
DEPARTMENT FOR
WORK AND
PENSIONS & JOBCENTRE
PLUS
MONDAY 4 FEBRUARY
2008
Q40 Dr Pugh: It may be the NAO were
looking from the pure point of view of accountancy and I am looking
at it more from the point of view of what outrages the citizen,
that they want to see addressed. Administered penalties are not
awfully good, are they, as a solution to the problem of fraud,
or they do not appear to be. A lot of them do not get paid and
when they do get paid they are fairly pitiful. Do they have any
subterranean effect? Do they change the behaviour of the fraudster?
In other words, though they may not pay a great deal back, they
do not do it again, or do you identify people who serially get
administrative penalty after administrative penalty until finally
you have to take them to court?
Sir Leigh Lewis: First of all,
it is important to say that we use two sanctions which are less
than a full blown prosecution, namely administrative penalty and
a caution, where the amount of the overpayment is less than £2,000
and where there are no aggravating circumstances. If there were
aggravating circumstances, say, even below that level—supposing
forged documents or something like that—we might well decide
to mount a prosecution in any event. I think it is also true to
say that we take a very, very different view, if I can put it
like this, of a first offence from a second offence, if you see
what I mean. If somebody is known by us to have received either
a caution or an administrative penalty previously and there is
another benefit fraud or alleged benefit fraud brought to our
attention, we are much more likely to prosecute a second time.
Q41 Keith Hill: Your Department is
under a lot of pressure, is it not, from the red top press? There
is nothing like welfare scroungers that gets the red tops salivating.
I dare say that when you are having a pint in the saloon bar at
the Bull and Bush practically everybody around you knows of dozens
of cases of welfare scroungers. Are you therefore rather surprised
that only one in 200 of the population has taken the trouble to
report a case on the hotline?
Sir Leigh Lewis: I am rather pleased
to say that most of my good friends give me an easier time when
we are off duty and do not talk to me all that much about the
performance of the Department. To take your absolutely key point,
our hotline is one of our most successful features. Last year
it received over 200,000 calls; this year up to December 171,000
calls. That is approaching 1,000 calls a day. It is open from
seven in the morning until 11 at night on every single day of
the week, including Sunday. The target is that 70% of the calls
result in a referral to our fraud investigators or to our customer
compliance teams. Our hotline is a very, very successful part
of our overall counter fraud strategy. Perhaps I am speaking almost
personally here. I neither want a society in which people are
for ever making unsubstantiated allegations against neighbours
or others, nor do I want a society in which people who have a
genuine belief that someone they know may be committing fraud
is in any way inhibited from passing that information on.
Q42 Keith Hill: I agree with you
about that. Do not get me wrong. I do not for one moment condone
fraud but I think it is quite curious that, although it may be
a success and you may have 1,000 calls a day, only one in 200
of the population has reported a fraud on the hotline. Can we
turn to paragraph 1.1 where it is reported that in 2006-07 there
were 614,000 cases of suspected fraud identified? How do you derive
that figure?
Sir Leigh Lewis: That figure comes
from our management information systems and it is derived from
the number of cases referred either to our fraud investigators
or now to our customer compliance teams.
Q43 Keith Hill: It is an actual number?
Sir Leigh Lewis: Yes, we believe
it to be the actual number.
Q44 Keith Hill: You are saying to
me that you think that, out there, there are over 600,000 people
with criminal intentions with regard to the benefit system?
Sir Leigh Lewis: No. That is taking
it a bit further because that means that that is a referral into
our system. That means that somewhere there is a suspicion or
an allegation. For example, someone has alleged to our hotline
that there is a fraud. Our data matching may have thrown up, as
it does with a considerable number of cases, an apparent inconsistency;
or it may be that a member of staff has reason to suspect that
somebody—
Q45 Keith Hill: It is not actually
a real figure about the number of fraudsters out there?
Sir Leigh Lewis: No, it is not
a figure about the number of fraudsters. It is what it says, in
effect, on the tin. It is the number of cases that are referred
into the system and which are then investigated.
Q46 Keith Hill: The 600,000 are 3%
of the overall number of benefit recipients but in reality the
number of fraudsters is likely to be lower than 3%?
Sir Leigh Lewis: You can take
it, can you not, that not all of those 614,000 cases last year
were ones where we concluded that a fraud had actually occurred
on any scale, because that is the whole nature of the process
that then goes on, which is either an interview carried out by
one of our customer compliance teams or a full blown fraud investigation.
Q47 Keith Hill: Again, do not get
me wrong. I do not want to condone fraud for one moment but, to
take up your own words about fraud and your correct moral position,
you said that of course it was right to pursue those carrying
out frauds because they are people doing something wrong deliberately.
They may be doing something wrong deliberately but they are not
very good at it, are they, really?
Sir Leigh Lewis: They span the
whole spectrum, do they not? We have people who are committing
serious, organised and highly professional attempts to defraud
the benefit system.
Q48 Keith Hill: I would like to go
there in a second. If you look at Figure 25 for example on page
33, which identifies the average overpayment per referral, for
the hotline it is £77 and for the general matching service
it is £282. For the housing benefit matching service it is
£332. Elsewhere in the NAO Report, it is stated that customer
compliance reviews led to changes in benefit in 95,000 plus cases.
The average actual overpayment was £48 per case. These are
not significant sums of money, are they?
Sir Leigh Lewis: No, they are
not, if you take the average, huge amounts of money. The point
I was making here was that in a sense we span the whole gamut
from somebody who is doing something which they know is wrong
but nevertheless the amounts involved are relatively small—neither
you nor I are condoning that but we are acknowledging that—to
people at the other end of the spectrum who are seeking to defraud
the taxpayer.
Q49 Keith Hill: Can you just talk
a little bit more about large, organised fraud because it is referred
to in the NAO Report but not dwelt upon.
Mr Couling: There are gangs of
people engaged in large scale, organised fraud. Typically, they
are not just looking at social security. There might be other
aspects of fraud. A quite regular one is the theft of credit cards
from the post. They are then used as ID to cash our giro cheques
that may well be stolen and typically there could be gangs of
people involved in passing these giro cheques out across a number
of Post Offices. To try and combat that, we have just completed
the roll out of UV lamps in every Post Office now so that you
can see where the cheques have been altered. The criminal mind
is very creative and will come at us from almost any angle.
Q50 Keith Hill: How much in a year
do you think is being purloined as a result of large, organised
fraud?
Mr Couling: Our movement to paying
through bank accounts has really reduced the amount of money that
we lost for example to cheque fraud. That is down to under £100,000
a year.
Q51 Keith Hill: £100,000?
Mr Couling: £100,000 a year
on the giro cheques we have recovered. We have just had a couple
who had 78 identities put in prison and they defrauded us by about
£1.8 million, from memory, so it really does vary.
Q52 Keith Hill: How many people do
you think are at this game?
Mr Couling: That is difficult
to say. Clearly, as criminality evolves, that will change. We
defend the system here and they move to the next bit, so it is
difficult.
Q53 Keith Hill: How many prosecutions
did you engage in last year on large scale, organised fraud?
Mr Couling: By our organised teams,
I think nearly 900, from memory.
Q54 Keith Hill: Can you give us a
note telling us how many, what sort and how much was involved?
Mr Couling: Definitely.[3]
Q55 Keith Hill: Sir Leigh, this is really
for you to satisfy my entirely vulgar curiosity. If you look at
Figure four on page 13, it is revealed that fraud committed by
customers living abroad is equal top at £74 million. Who
are these characters living on the Costa del Crime, perpetrating
these frauds?
Sir Leigh Lewis: This is a serious
issue for us and one that we already address very seriously. There
is a specialised team within the Fraud Investigation Service.
There are two types of fraud which may fall under what we loosely
term the abroad fraud position. One is where a person was legitimately
receiving a benefit abroad for example and that could well be
and often will be a state retirement pension which somebody is
perfectly entitled to receive while they are abroad; but a fraud
which we know does occur is that person dies but deliberately
we are not told that. Another person—it could be a family
member or a different person—goes on collecting that money
knowing that they are doing so unlawfully. That is one kind of
fraud that can happen. The other which can equally go under that
heading is where the conditions for receipt of benefit do not
allow someone to receive that benefit while they are abroad for
a lengthy period; but they deliberately fail to inform us when
they go abroad and therefore continue to claim that benefit unlawfully.
Q56 Mr Dunne: It is clear from Figure
two on page seven that while you have made progress, as the Chairman
said at the beginning, on tackling fraud there has been a corresponding
increase in error from I think £1 billion in 2001-02 to £1.9
billion in 2006-07, by deduction from that table. This Report
is on fraud rather than error, but can you tell us a little bit
about what you have been doing to reduce the level of error?
Sir Leigh Lewis: Yes, I certainly
can. I have already said to the Committee that we have established
an official error reduction task force. We did that in January
2006 and we do think it is now correcting weekly errors of over
£2 million which would otherwise have continued. We published
an error reduction strategy in January of last year. Its aim—an
ambitious aim—is to deliver savings of around £1 billion
by 2012. The three key elements of that strategy are preventing
new error from entering the system in the first place. For example,
that includes implementation of IT enhancements to stop benefit
payments as soon as a customer's condition of entitlement expires.
Secondly, ensuring that customers and our staff comply with and
understand the benefit rules. That is better training, simplified
guidance for our staff. It is better leaflets—we have talked
about that in this Committee—and notifications for our customers.
Finally, it is correcting the error that is already in the caseload
using data matching technology to target the high value errors
in the system. We are doing an awful lot in all of these regards.
I believe that it is having an impact. One of the slightly frustrating
things is there are time lags in the statistics which mean that
I cannot yet guarantee to this Committee that all those steps
are having an impact, though I take some comfort from the fact
that, while error is too high, its overall level is not rising
further.
Q57 Mr Dunne: Although the absolute
level is rising. Do you see any relationship between the increase
in error and the increase in complexity of the benefit structure
that we have?
Sir Leigh Lewis: As I said before,
I think it would be just wrong to suggest that there is no link.
The more complex a system is, the more likely it is that staff,
no matter how well intentioned and well trained, will make mistakes
in implementing that system. It seems to me it must be the case
that customers who do not have any dishonest intention will nevertheless
find themselves unwittingly making errors. One of the initiatives
that we are running in our Department for all sorts of reasons
is a back to the floor initiative where the senior managers in
the Department spend a week working on a customer facing activity.
Q58 Mr Dunne: Are you doing that
as well?
Sir Leigh Lewis: Yes. I personally
spent a week last July working on our disability and carers' helpline
in one of our Blackpool offices, taking calls from members of
the public inquiring about Disability Living Allowance and Attendance
Allowance. That brought home very much to me that these are complex
benefits, complex for our staff to administer and complex for
our customers to understand.
Q59 Mr Dunne: Given the emphasis
that you personally place on trying to reduce the level of fraud
and error, I note from pages 24 and 25 of the Report that there
is no single fraud and error tsar within our Department. Mr Couling
is the Director of Fraud and Error just within one division, within
an important division, Jobcentre Plus. Do you think you ought
to be trying to provide some form of management structure to focus
on this across the entire Department?
Sir Leigh Lewis: If I may say
so, I have such a person. She is sitting to my left and I regard
Shirley Trundle as overseeing that whole effort to reduce error
in the Department.
Ms Trundle: I have an entire division
of staff who work on the overall strategy within the Department
for driving down fraud and error, looking right across the piece
at all of our agencies and at the shared functions like data matching
that we have to support all of the agencies in their work. The
structure was further emphasised with the new performance framework
that we have for government departments and the introduction of
departmental, strategic objectives. We have an objective within
DWP—it is departmental, strategic objective six—which
is to pay our customers the right benefit at the right time. I
am the Senior Responsible Officer within the Department for that
objective and will therefore be responsible for ensuring that
we have a coherent structure of targets below that and understand
precisely what the delivery chain is that will enable us to deliver
against that objective.
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